I will start by saying that I have no formal educational in Economics, financial investments or Politics. I grew up being told that Republicans stood for small government, fiscal responsibility by the individual, and “trickle down economics”. Democrats were for big central government and government-managed retirement, and social programs as “safety nets”. Yes, I know that has changed. I follow the news with a mix of humor, despair, cynicism, knowing more bad news is reported than good, and the reality is that most of it will never affect me. I am not the smartest person I know, nor the dumbest. Considering myself as neither Republican nor Democrat, rich or poor, tall or short, young or old; I am a statistically average American Citizen.
So the more I learn about the “credit crunch” or the “bank bailout”, the more I wonder if really don’t understand things as well as I think I do. Why does the Government need to buy up to 700 Billion Dollars worth of shares to save private financial institutions? So, to keep things a little more simplistic I would like to refer to the following two articles linked off CNN to Time.
The first is “The Credit Crunch: Where Is It Happening?” By Barbara Kiviat. It talks about how the money has slowed in flowing down, the credit card companies has sent out less credit card applications, student loans will be harder to find and how that may affect ‘main street’. Please read the article, I will wait.
The second article is titled “Let Risk-Taking Financial Institutions Fail” By Ari J. Officer and Lawrence H. Officer. This touches on how the banks got into the situation and they use a phrase that I am very fond of. Follow the money. Please read the article, I will wait once again.
Why do I point out these articles? Well, as Steve Martin is quoted; "Let's face it, some people have a way with words...other people...uhhh...ohhh...not have way". But in a simplistic one page article I feel both of these sum up what is really going on better than I can. One article is talking about how these bank failures might affect you--what could happen if it gets worse. It is well written and connects on a personal level. The second article is about the facts of the issue and gives the reasons why the banks should be allowed to fail. The second article also mentions if it does get worse and the money does stop ‘trickling down’ then the government can still step in.
But Bush wants action, or else. Why? In my opinion, to save political face. Bush has been saying for years the economy is strong. The economy is strong, but all markets go through corrections. (I remember the early 80’s with Reaganomics with bank corrections and out of control government spending.) Not to mention the fact that the real people that will be affected by this are the people with the money invested that flows both ways between Wall Street and DC. That’s why both presidential nominees want this bailout.
But then again what do I know about Economics, Financial investments or Politics? I am a statistically average American voter.